Delhi High Court
Salwan Construction Co. vs Union Of India And Ors. on 5 September, 1989
Equivalent citations: 41(1990)DLT374
JUDGMENT S.N. Sapra, J.
(1) Salwan Construction Company, the present petitioner, was awarded by respondent no. 1, the work for construction of M.S.O. building, at plot No. 35, Block D and D-1, at the estimated cost of Rs. 41,17,513.00 , on the terms and conditions, as incorporated in the agreement No. 16/EE/CD-II/69-70.
(2) Under the agreement, the work was to commence on January 21, 1970, and was to be completed within a period of 18 months, i.e. on or before July 20, 1970. It is not disputed that the work was completed on March 28,1974.
(3) Various disputes arose between the parties, under the agreement, which provided for settlement by arbitration, under clause 25. Vide his letter dated December 24,1984, Chief Engineer, (CZ) C.P.W.D., New Delhi, appointed Shri Sarvesh Chandra, as the sole arbitrator, to decide the disputes between the parties, as were referred to him. The arbitrator entered upon reference, on January 21, 1984.
(4) Petitioner and Union of India filed claims and counter claims respectively, before the arbitrator.
(5) Petitioner made the following claims : CLAIMNo. 1 : The Claimant claims a sum of Rs. 72, 285.00 on account of alleged unjustified recovery For excess use of cement. The supply of cement in bags was made short in weight by Central stores and the claimant was asked to use cement by weight. Claim No. 2 : The Claimants claim a sum of Rs. 38,100.00 on a/c alleged wrong recovery made in final bill for extra item of terrazo tiles in flooring though the tiles passed the abrasion test. Claim No. 3 : The Claimants claim a sum of Rs. 746.00 or thereabouts on account of Mild steel flat. Claim No. 4 : The Claimants claim a sum of Rs. 8,378.00 or thereabouts on account of alleged wrong recovery towards flush door shutters. Claim No. 5 : The Claimants claim a sum of Rs. 3,823.00 or thereabouts on account of alleged wrong recovery towards particle board. Claim No. 6 : The Claimants claim a sum of Rs. 3,770.00 or thereabouts for alleged wrong recovery towards roofing felt used on the work. Claim No. 7 : The Claimants claim a sum of Rs. 2,680.00 or thereabouts on account of alleged wrong recovery in respect of white glazed tiles. Claim No. 8: The Claimants claim a sum of Rs. 5,621.00 or thereabouts on account of alleged wrong recovery in respect of Cuddapah stone. Claim No. 9 : The Claimants claim a sum of Rs. 3,725.74 or thereabouts alleged to have been wrongly recovered towards Mastic treatment. Claim No. 10: The Claimants claim a sum of Rs. 1,916.92 or thereabouts alleged wrong recovery towards screws for various items of wood work. Claim No. 11 : The Claimants claim a sum of Rs. 915.00 (Rs. 274+934-398) or thereabouts on account of alleged less payment for the item of plastering. Claim No. 12: The Claimants claim a sum of Rs. 1,694.00 (Rs. 1296+398) or thereabouts on account of alleged wrong recovery towards screws etc. in aluminium windows. Claim No. 13 : The Claimants claim a sum of Rs. 644.00 or there abouts on account of alleged recovery for stair case railing. Claim No. 14 : The Claimants claim a sum of Rs. 644.00 or thereabouts on account of alleged recovery in respect of ribbe glass. Claim No. 15: The Claimants claim refund of Rs. 894.25 (Rs. 318.25+576) or there abouts on account of wrong recovery for marble flooring and marble veneering. Claim No. 16: The Claimants claim a sum of Rs. 267.15 (Rs. 160.42 plus 106.73) or thereabouts on account of alleged wrong recovery for improper fixing urinal pipes.
(6) Respondent No. 1 filed the following counter claim : Counter Claim No. 1 : The Union of India through the Executive Engineer Construction Division No. Ii Cpwd claims a sum of Rs. 5000.00 towards cost of inconvenience caused for unnecessary dragging the department in arbitration.
(7) The arbitrator made and published his award on June 6, 1986.
(8) By his award, the arbitrator either fully or partly allowed all the claims of petitioner and rejected the counter claim of respondent no. 1, and awarded that respondent, Union of India, would pay to petitioner a sum of Rs. 1,21,429.06, plus interest, at the rate of 12 per cent per annum, from the date of the award, till the payment or decree, whichever was earlier.
(9) Petitioner accepted the award and moved a petition, under Sections 14 and 17 of the Arbitration Act, 1940, thereby praying that the award be filed and same be made Rule of the Court.
(10) After filing of the award in Court, Union of India (respondent no. 1) filed objections under Sections 30 and 33 of the Arbitration Act, 1940, against the award.
(11) In its objections, to the award, respondent No. 1 has alleged that the claims of petitioner, were barred by limitation, inasmuch as, petitioner sought arbitration, vide letter dated March 8, 1983, that was after the expiry of 3 years, from March 27, 1976, the date of the final bill.
(12) It has been further alleged that the arbitrator illegally misconstrued and mis-interpreted the various clauses of the agreement, as such, there is an error apparent on the face of the award. The award shows non-application of mind by arbitrator and certain claims have been allowed without any evidence on record.
(13) In reply, petitioner controverter all the allegations, as made by respondent No. 1, in objections to the award.
(14) On the pleadings of the parties, following issues were framed : 1. Whether the award dated 6th June, 1986 i.s liable to be set aside on any of the grounds as mentioned in the objection petition I A No. 2432/87? 2. Relief.
(15) Before dealing with the objections, to the award, it will be proper to note the legal position, with regard to the setting aside of an award under Sections 30 and 33 of the Arbitration Act, 1940.
(16) The scope and extent of examination, by the Court, of the award made by an arbitrator, has been laid down in various decisions. As held, by the Division Bench of this Court in College of Vocational Studies v. S S. Jatiley A.I.R. 1987, Delhi, 134, there are limits for judicial reviewability and the Courts exercise limited jurisdiction in the proceedings, for setting aside an award. The Courts do not exercise appellate jurisdiction over the verdict of an arbitrator and, as such, cannot go into the merits of the case, nor the Courts can re-appraise and re-examine the evidence, led before the arbitrator. The Courts, also can not look into the insufficiency of the evidence, led before the arbitrator.
(17) Where, under an agreement, the arbitrator is required to give reasons for his award, he is not under an obligation to give a detailed judgment or detailed reasons. By reason, it means, that the award should be speaking award. In such cases, what is expected from the arbitrator is, that he should indicate his mind, whereby it can be ascertained, as to how he has arrived at a particular conclusion. In case of reasoned award, the arbitrator is required to indicate the trend of his thought process, but not his mental meanderings. When the finding of the arbitrator is based on no evidence, then certainly, the Court can go into such finding and set aside the same, as the award being perverse one. In other words, the Court can set aside the award, only if it is apparent on the face of the award, that there is no evidence to support the conclusions, or if the award is based upon any legal proposition, which is erroneous. The arbitrator is entitled to decide rightly or wrongly, but if an error of law appears on the face of the award, then the Court can interfere into the same.
(18) However, it is not for the Court to see the reasonableness of the reasons, given by the arbitrator or insufficiency of the reasons. Sufficiency of the reasons, depends upon the facts and circumstances of each case. Reasons are the links on the material, documentary or oral evidence, adduced before the arbitrator on which certain inferences are drawn and conclusions are made. There must be some rational nexus between the two indicated in the award.
(19) As held by the Supreme Court in Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd., and another, ? award should be read reasonably, as a whole, to find out the implication and the meaning thereof. Short intelligible indications of the grounds should be discernible to find out the mind of the arbitrator for his action even if it be enjoined that in all cases of award by an arbitrator reasons have to be stated. Reasons should not only be intelligible, but should also deal either expressly or impliedly with the substantial points, that had been raised.
(20) In Hindustan Tea Co. v. M/s K. Shashikant & Co. & Anr. , the Supreme Court held : "THE award is reasoned one. The objections which have been raised against the Award are such that they cannot indeed be taken into consideration within the limited ambit of challenge admissible under the scheme of the Arbitration Act. Under the law, the Arbitrator is made the final arbiter of the dispute between the parties. The award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion or has failed to appreciate facts. Strong reliance was placed by the appellant's learned counsel on an old Madras decision in Yogamal Boyee Ammani Ammal v. Naina Pillai Markayar, (1909) 2nd 33 Madras 15. In our view, on the facts of this case challenge to the award is not permissible by taking the stand that the Arbitrator acted contrary to the provisions of Section 70 of the Con- tract Act. In these premises the objection filed to the Award has to be rejected. We direct the award to be made a rule of the Court. The parties shall bear their own costs throughout".
(21) Mr. P.N.Mishra, learned counsel for Union of India, has urged that the arbitrator misconducted the arbitration proceedings, as the claims of petitioner, were apparently barred by limitation, because petitioner sought arbitration, by letter dated March 8, 1983. According to him, this letter was issued after the expiry of 3 years, from March 27, 1976, the date of the final bill.
(22) The arbitrator has dealt with the question of limitation, as raised by respondent, by way of preliminary objection, before him. The learned arbitrator has held that in view of the admitted position, insofar as claim Nos. 1 and 2, were concerned, claimant did seek arbitration, vide letter dated August 30,1974. Letter is Ext. C. 10. Thus, these claims were within limitation.
(23) As regards claims Nos. 3 to 16, the arbitrator held, that claimants invoked arbitration, vide letter dated March 4, 1980. (Letter is Ext. C. 9). Relying on respondent's Exhibits, Ext. R. 9 and R. 35, the arbitrator has held that the accounts of claimants were not finalised, till the end of March, 1977. Thus, in his view, the bill paid in 1976, could not be treated as final bill.
(24) In my view, the arbitrator has rightly held that the claims were within limitation. More so, there is no error apparent on the face of the award, which requires interference by this Court.
(25) Claim No. 1 In fact, Mr. Mishra, learned counsel for respondent No. I has addressed arguments only on claim No. 1.
(26) Under this claim, petitioner has sought recovery of Rs. 72, 285.00 on account of unjustified recovery for excess use of cement. Respondent No. 1 had recovered the amount, at double the price of the excess quantity of cement, under clause 42 of the Contract.
(27) Mr. Mishra has contended that the arbitrator has travelled beyond the reference, in awarding a sum of Rs. 47, 610.00 under this claim, because no reference, whatsoever, with regard to the question, as to whether the recovery at the double rate, was justified or not, was made to the arbitrator Thus, the award for refund, is illegal and un-warranted.
(28) On the other hand, learned counsel for petitioner, urged that the Department could not make the penal recovery, at double the rate, beyond actual amount. It was for respondent No. 1 to prove before the arbitrator as to how much loss had been actually suffered by the Department. He has placed reliance upon the judgments in M/s Suresh Kumar & Co. v. Union of India, Suit No. 1682-A184 and I.A. 3510/85, passed by M.K. Chawla J on November 15,1985 and M/s R.S. Builders v. Union of India, Suit No 1092-A/84, passed by H.C. Goel, J. on February 24, 1986.
(29) Clause 42 of the agreement reads as under : "CLAUSE42 (i) The contractor shall see that only the required quantities of materials are got issued. Any such material remaining unused and in perfectly good condition at the time of completion or determination of the contract shall be returned to the Engineer-in-charge at a place where directed by him, if by a notice in writing under his hand, he shall so require. Credit for such material will be given at the prevailing market rate not exceeding the amount charged from him, excluding the storage charges levied at the time of issue of materials to him. The contractor shall also not be entitled to charge and incidental charges for returning the surplus materials from and to the stores where from they were issued. (ii) After the completion of the work, the theoretical quantity of cement to be used on works shall be calculated on the basis of Cpwd statement showing quantities of cement to be used in different items of work provided in the Delhi Schedule of Rates 1967, or at place where Delhi Schedule of Rates 1967, will not be applicable in case of agreements, it shall be calculated on the basis of standard formulae. Over this theoretical quantity of cement shall be allowed variation up to 5% plus/minus for works the estimated cost of which as put to tender is not more than Rs. 2 lakhs up to 4% plus/minus for works the estimated cost of which put to tender is more than Rs. 2 lakhs but up to Rs. 5 lakhs and up to 3% plus/minus for works the estimated cost of which put to tender is above Rs. 5 lakhs. The different in quantity of cement actually issued to the contractor and the theoretical quantity including authorised variations, if not returned by the contractor, shall be recovered at twice the issue rate including storage charges without prejudice to the provision of the relevant conditions regarding returns of materials governing the contract. In the event of it being discovered at the quantity of cement used is less than the quantity ascertained as hereinbefore provided (allowing variations on the minus side stipulated above), the cost of the quantity of cement not so used shall be recovered from the contractor on the basis of stipulated issue rate including storage charges and cartage to site. (iii) The provisions of the foregoing sub-clause shall apply in the case of steel reinforcement or structural steel section except that the theoretical quantity of steel shall be taken as the quantity required as per design or as authorised by the Engineer-in-charge including authorised lappages, plus 5% wastage due to cutting into pieces. Over this theoretical quantity plus 5% and minus 4% shall be allowed as variation due to wastage being more or less. (iv) The provisions made above are without prejudice to the right of the Government to take action against the contractor under the conditions of the contractor for not doing the work according to the prescribed specification".
(30) In the aforesaid two judgments, this Court considered clause 42 of the Agreement.
(31) In M/s R.S. Builders (supra), H.C. Goel, J. held : "THE same view was reported by a Division Bench of Rajasthan High Court in the State of Rajasthan v.Chander Mohan Chopra . Due note was taken of the said judgment of the Supreme Court in that case. In the present case, it was quite possible for respondent No. 1 to prove by leading evidence that it had actually suffered damage over and above the price at which the material was actually supplied such as because of any increase in the price of materials supplied during the period from the date of supply to the date of its recovery. In the present case, respondent No. I having failed to lead such like evidence, the view taken by the Arbitrator was not justified in recovering anything over and above the prices of excess material supplied could not be at all said to be illegal, much less an apparent error of law. Clause 42 of the agreement, which is standard clause in contracts executed by the Cpwd was considered by M.K. Chawla, J. in Suresh Kumar & Co. v. Union of India, suit No. 1682-A/84 and by Mr.Mahinder Narain, J. in M/s Mohinder Nath & Co. v. Union of India and this suit bears No. 103-A/85. They also took the view that Union of India was not entitled to recover at double the rate without proving of actual damage having been suffered by it. In conclusion, I hold that there was no legal misconduct on the part of the arbitrator in allowing claim No. 12".
The arbitrator has rightly held that in the absence of loss, having been suffered, or the proof of actual loss, if suffered, respondent No. 1 was not entitled, having already recovered the issue rate, to recover double the issue rate of cement consumed by the Claimants in excess of the theoretical calculations. I do not find any legal mis-conduct on the part of the arbitrator, in awarding the refund of the aforesaid amount to the claimant.
(32) Learned counsel for Union of India, has failed to point out a single instance, in respect of any claim, which has been allowed by the arbitrator, without any evidence or material on record.
(33) Claim No. 2. According to respondent No. 1, arbitrator has misconducted in allowing this claim, as this is contrary to the test certificate issued and the work carried out by petitioner. It is further alleged that arbitrator misconducted himself, in relying upon a memo, issued on May 24, 1972, although the same was not applicable to the agreement. The arbitrator has dealt with claim No. 2 thoroughly. He has observed that after the receipt of the test certificate, dated March 29, 1972, (Ext. R. 14), respondent No. 1 had written letter dated May 18, 1972 to the contractor, thereby conveying the result of the test and asking the Contractor to show cause, as to way the work of terrazo tiles be not rejected. Copy of the test certificate, however, was not sent to the Contractor. The samples, in the test certificate, have been described as semi polished terrazo tiles with white black and chocolate coloured stone chips of sizes ranging from smallest up to 15 mm maximum and with thickness of 23.5 mm. In the letter dated February 19,1973, respondent No. 1 conveyed the sanction of reduction item statement in respect of this item, amounting to Rs. 38, 100.00 in the reduction item statement. However, the item has been described as pre-cast terrazo tiles 20 mm thick with white black or white and black marble chips of size 6 mm. According to arbitrator, there is no explanation For the discrepancy in the description and thickness of the samples.
(34) The arbitrator has also relied upon the office memo dated May 24, 1972, issued by the Engineer-in-chief, where under the limit of wear has been raised to 2.5 mm and 3 mm respectively for acceptance of Cpwd works.
(35) This Court is not sitting in appeal. The arbitrator has given sufficient reasons for arriving at a conclusion in deciding this claim.
(36) Claims No. 3, 4 & 5. With regard to claims No. 3, 4 and 5, the arbitrator has given sufficient reasons in deciding these claims of petitioner. There was sufficient material before the arbitrator to arrive at a reasonable conclusion in allowing these claims.
(37) Claim No. 6. Under this claim, petitioner claimed a sum of Rs. 3, 770.00 . Vide letter dated June 2, 1973, (Ext. R. 13), respondent No. 1 asked petitioner to show cause, as to why the entire work, executed by the Contractor, be not rejected. According to respondent, no reply to this letter was received. However, instead of rejecting the item, provided by petitioner, respondent No. I estimated the same in deducting an amount of Rs. 3, 770.00 in 1977, even after the defect liability period was over and final bill had been paid. The arbitrator has held that this unilateral action of respondents, and that too after about 2" years, after completion of work was not tenable.
(38) Similarly, the arbitrator has dealt with each claim of petitioner as well as the counter of respondent No. 1 and on the basis of materials, came to the conclusion, as recorded in the award.
(39) The arbitrator has awarded interest at the rate of 12 per cent per annum, from the date of the award, till payment or decree, whichever is earlier, on a sum of Rs. 1,21,429.00 .
(40) In the objections, respondent No. 1 has alleged that under the agreement, no interest could be awarded by the arbitrator.
(41) This proposition of law stands concluded by the Supreme Court in Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd., and another, , (supra) where by it was held: "HAVING regard to the position in law emerging from the decision of this Court in Executive Engineer (Irrigation) Balimela (supra) and Section 29 of the Arbitration Act, 1940, and Section 34 of the Code of Civil Procedure, we would modify the grant of interest in this case. The arbitrator has directed interest to be paid at 17% per annum from 6.8.1981 up to the date of decree viz., 17.6.1986. Since in this case, the reference to arbitration was made, after the commencement of the (Interest Act, 1978), the arbitrator under Section 3(1)(a) of the said Act was entitled to award interest from 6.8.1981 till 21,8.1984 in view of this Court's decision in Abhduta Jena's case (supra. In the light of the same decision, he could not have awarded interest for the period from 22.8.1984 till the date of the publication of the award viz. 19.7.1985. So far as interest for the period from the date of the award (19.7.1985) till the date of the decree is concerned, the question was not specifically considered in Abhaduta Jena's case (supra) but special leave had been refused against the order insofar as it allowed interest for this period. We think interest should be allowed for this period on the principle that this Court can, once proceedings under Sections 15 to 17 are initiated, grant interest pending the litigation before it, i.e. from the date of the award to the date of the decree. It may be doubtful whether this can be done in cases arising before the Interest Act, 1978 in view of the restricted scope of Section 29 of the Arbitration Act. But there can be no doubt about the court's power to grant this interest in cases governed by the Interest Act, 1978 as Section 3(l)(a) which was applied by Abhaduta Jena to arbitrators will equally apply to enable this Court to do this in these proceedings".
(42) In the present case, no pendente lite interest from the date of reference, till the date of award was awarded by the arbitrator. The arbitrator has, however, awarded the interest at the rate of 12 per cent per annum, from the date of award, till the date of decree of payment, whichever was earlier. Following the dictum of the Supreme Court in the aforesaid case, I exercise my power under Section 3(l)(a) of the Interest Act, 1978 read with Section 29 of the Arbitration Act, 1940, and I direct that the above principal amount shall carry interest at the same rate, from the date of award till the date of actual payment.
(43) The Objector has failed to make out any case for setting aside the award.
(44) Issue No. 1 is thus decided against respondent No. 1.
(45) Under the facts and circumstances of the case, the objections filed by respondent no. 1, are hereby dismissed. The award is made a Rule of the Court and decree, in terms of the award, is passed. The award shall form part of the decree. Award made rule of court.